Understanding how we choose
When you give people different options and tell them to choose one, they tend to compare the benefits in order to work out the value of things first. Most of us don’t know what we want unless we view it in some context; we rarely value things in absolute terms as it’s hard to make decisions in a vacuum. Furthermore, it’s harder to compare things that are dissimilar so, unsurprisingly, we prefer to compare items that are similar.
Businesses that are aware of this can exploit this tendency to influence what people buy. They can do this by including decoy items to make one item (the one they’d like you to pick) look more attractive than another. A well-known example that is often used to demonstrate this is The Economist’s subscription options:
(a) web only: $59
(b) print only: $125
(c) web & print: $125
It’s difficult to compare the value of options (a) and (b) and requires much more thinking. But it’s easy to compare options (b) and (c).
You would expect most people to choose (c) over (b) because the print only option costs the same but offers less, making (c) the more attractive option. And this is precisely what happened in an experiment that Dan Ariely (@danariely) describes in his book Predictably Irrational where he asked 100 MIT students to choose one from the above list of options:
- 16 students chose (a) the web only option
- 0 students chose (b) the print only option
- 84 students chose (c) the web and print option
A further experiment was carried out where the same students were asked to make their choices again, except this time, option (b) was removed. Now you might not expect this to make a difference especially given that nobody chose option (b) in the previous exercise. However results showed that once this decoy option was removed, more people chose the cheaper web-only subscription.
- 68 students chose (a) the web only option
- 32 students chose (c) the web & print option
It looks like the print only subscription might have been a decoy added to drive people to the web & print subscription offer which is a better deal in comparison.
Steering by stealth: using a decoy to influence purchasing decisions
In another example, Ariely describes the launch of a bread making machine (price: $275) that was not selling well. The manufacturer decided to introduce another model: one which was larger and 50% more expensive than the initial machine. The manufacturer soon found that sales were increasing – but not of the newly introduced larger machine. It was actually the initial bread making machine that was now rising in sales. It appears that introducing another option gave consumers something to compare against so they didn’t have to make their decision in a vacuum.
So in a nutshell, it may be useful to learn how to use a decoy product to influence consumer purchasing decisions.
In my lunch scenario, the more expensive meal deal must have looked like a better deal to me than the chicken wrap-only option I had originally thought I had wanted. My wrap-only option, though cheaper, was almost as expensive as the meal deal but it was inferior as it didn’t come with the drinks and chips. That said, I didn’t originally want the drink and chips. If the wrap only option had not existed, might I have chosen an alternate, much cheaper dish or just walked out without considering the meal deal? Neither would have been ideal outcomes for the restaurant.
I’d like to think that I have the presence of mind to identify what I want beforehand and see how the available options compare to my predefined needs. But when faced with many options, I can forget to compare the available options only with my original needs and can be directed towards making other comparisons instead. Apparently the decoy effect works in the dating game too. I’m thinking about hitting the bars this weekend. Now if only I could find a slightly inferior version of me willing to be my wing woman….
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Note: most of this post is based on a particular chapter from Dan Ariely’s book Predictably Irrational. It’s an interesting read and I was originally going to summarise the entire book as a blog post. Instead, I may just cover specific chapters.
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